10 items found
PWBM estimates that the Senate-passed version of the Inflation Reduction Act would reduce non-interest cumulative deficits by $264 billion over the budget window. The impact on inflation is statistically indistinguishable from zero. GDP falls slightly within the first decade while increasing slightly by 2050. Most, but not all, of the tax increases fall on higher income households.
PWBM and CBO find an almost identical impact of the Inflation Reduction Act of 2022 (“IRA”) on the budget, with small differences stemming from the timing of the corporate minimum tax revenue. The impact on inflation is statistically indistinguishable from zero for either estimate.
PWBM estimates that the Inflation Reduction Act would reduce non-interest cumulative deficits by $248 billion over the budget window with no impact on GDP in 2031. The impact on inflation is statistically indistinguishable from zero. An illustrative scenario is also presented where Affordable Care Act subsidies are made permanent. Under this illustrative alternative, the 10-year deficit reduction estimate falls to $89 billion.
PWBM estimates that Medicaid’s inflation adjusted expenditures on Long Term Care services will increase from $130 billion in 2020 (0.62 percent of GDP) to $179 billion in 2030 (0.71 percent of GDP). We project that Medicaid expenditures on Nursing Home and Home Health will increase 4.7 percent and 6.9 percent per year above inflation through 2030, respectively.
We estimate that increases in wage earnings in 2021 offset the higher cost of living due to inflation for most households with incomes between $20,000 and $100,000. Higher-income households saw their earnings rise by more than their cost of living, while the lowest-income households (below $20,000) saw their earnings rise by only one third of their increase in cost of living.
PWBM projects that the spending and taxes in the Build Back Better Act (H.R. 5376), as written, would add up to 0.2 percentage points to inflation over the next two years and reduce inflation by similar amounts later in the decade. As an illustrative alternative, if temporary major spending provisions were made permanent, the bill would add up to a third of a percentage point to near-term inflation and have a negligible impact on inflation later in the decade.
We estimate that inflation in 2021 will require the average U.S. household to spend around $3,500 more in 2021 to achieve the same level of consumption of goods and services as in recent previous years (2019 or 2020). Moreover, we estimate that lower-income households spend more of their budget on goods and services that have been more impacted by inflation. Lower-income households will have to spend about 7 percent more while higher-income households will have to spend about 6 percent more.
Higher inflation reduces the real value of the government’s outstanding debt while increasing the tax burden on capital investment due to lack of inflation indexing. Increasing the current annual inflation target regime from 2 percent to 3 percent inflation reduces debt while lowering GDP.
We estimate the budgetary and economic effects of a new carbon tax of $30 per ton of emissions, which is enacted on January 1st, 2021, rising by inflation plus 5 percent through 2050. We project that it raises $1.6 trillion of additional revenue on a conventional basis over the 10-year budget window and increases GDP by 2.2 percent by 2050.
